Considerations for Michigan K-12 Schools Expending CARES Act Funding

Last updated Sept. 30, 2020

In March 2020, the World Health Organization declared the novel coronavirus outbreak (COVID-19) to be a global pandemic. In response, the federal government passed the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, which provided states with various resources to mitigate the economic impact of COVID-19. The Michigan legislature has provided some of those resources to K-12 school districts through several different programs, each with its own set of requirements. This position paper will attempt to address some of the issues school districts should consider when expending those funds.

The guidance contained in this position paper is the result of multiple conversations with the Michigan Department of Education (MDE), the Michigan School Business Officials (MSBO), the Governmental Accounting Standards Board (GASB), the House Fiscal Agency, and the State Budget Office. This is a rapidly changing situation, and new guidance is continually being released. Accordingly, the information in this position paper is subject to change.


Michigan K-12 schools have received financial assistance under several separate federal programs, each with its own unique requirements and limitations on spending. Despite those limitations, there will likely be more than one “right” way for districts to allocate their expenditures. In general, districts should first identify all of their available funding, and then apply eligible costs to the most restrictive funds first.

Each of the major sources of COVID-19-related funding provided to Michigan K-12 schools are listed below, along with the related federal assistance listing (CFDA) number, and a brief overview of the allowable costs.

Elementary and Secondary School Emergency Relief (ESSER) Funds - CFDA 84.425

Education Stabilization Fund – These funds may be spent on a very broad range of costs (including any activity authorized by the ESEA of 1965). The normal rules about not using federal funds to supplant local spending are not applicable. While districts were required to submit a preliminary spending plan to MDE early on during the pandemic, districts are permitted to amend those plans and use the expenditures in a different way. Funds may be applied to costs incurred between March 13, 2020 and Sept. 30, 2021.

Education Equity Fund – These funds are restricted to two primary purposes: (1) purchasing educational technology that aids in “regular and substantial educational interaction between students and their classroom instructors,” and (2) providing mental health services and support.

Governor's Emergency Education Relief (GEER) Fund Grant - CFDA 84.425

These funds overlap the allowable costs from the Education Equity Fund for connectivity and student mental health.  In addition, they may also be used for: (1) addressing learning loss, (2) out-of-school time learning, (3) remote learning materials and training, (4) teacher training and curriculum, and (5) other health safety and wellness needs identified in the MI Return to School Roadmap.

Coronavirus Relief Fund (CRF) - CFDA 21.019

The CRF was used to provide the resources provided on the July and August 2020 State School Aid payments under line items “11p – CORONAVIRUS RELIEF FUNDS” ($350 per pupil) and “103(2) - DISTRICT COVID COSTS” ($12.32 per pupil). Funds may be applied to costs incurred between March 1, 2020 and Dec. 30, 2020.

Guidance on the CRF has been constantly evolving. In general, it covers “necessary expenditures” incurred due to COVID-19 that had not been accounted for in the recipient’s most recently approved budget when the CARES Act was enacted (March 27, 2020). This portion of the CARES Act is administered by the U.S. Department of the Treasury, which has issued general guidance and frequently asked questions (FAQs) that have been updated multiple times.

While Treasury has noted that Federal Cost Principles are not applicable to the CRF, there are still restrictions on allowable costs, and documentation requirements to demonstrate how the funds were expended. As of the date of this paper, some of those requirements were still apparently at odds with one another. For example, Treasury’s FAQ indicates that the CRF may be used for costs associated with the safe reopening of schools, and even adds that “as an administrative convenience, Treasury will presume that expenses of up to $500 per elementary and secondary school student to be eligible expenditures, such that schools do not need to document the specific use of funds up to that amount.” However, in a separate document from the Treasury Office of Inspector General, recipients are instructed to maintain detail ledgers, receipts, contracts, and agreements on how funds were expended. In addition, there is a general requirement in the Uniform Guidance that the same cost not be applied to multiple funding sources. Accordingly, MDE requires districts to identify and move specific costs to grant code 798 for the 103(2) funds and 799 for the 11p funds.

Despite being allowed to cover costs from as early as March 1, 2020, many districts will likely use the CRF to cover costs from FY 2021. For the purpose of determining that costs had not previously been accounted for in the budget, Treasury has indicated that the FY 2020 budget should still be used as the baseline. However, even costs included in the previous budget (such as salaries) can be eligible if they are for a “substantially different use” than previously budgeted. In this case, redeploying educational staff or faculty to develop online capabilities is considered to be a substantially different use of funds; however, actually delivering online instruction is not.

Strategies to Consider

As stated previously, with multiple funding sources and overlapping eligible expenditures, there is more than one “right” way for districts to allocate their expenditures between grants. However, here are some strategies to help districts maximize their allowable costs while minimizing administrative effort:

  1. Start by identifying (and quantifying) the available funding from each source.
  2. Identify the district’s eligible costs by category for both FY 2020 and FY 2021 (recognizing that some costs will be eligible in multiple awards), including:
    • Payroll costs – time spent by teachers and administrators for a “substantially different use,” such as developing online capabilities
    • Personal protective equipment (PPE)
    • Additional cleaning/sanitation costs
    • Supplies and materials not otherwise used in prior years
    • Technology purchases to support online instruction
  3. When identifying eligible costs, consider where those costs would otherwise be charged. Expenditures typically charged to other federal grants (either as direct or indirect costs) will not benefit the district if reassigned to COVID-19 funding, as they will result in offsetting reductions to other funding sources.
  4. In general, simpler reallocations are better that complicated ones. You will need to document any costs moved to a COVID-19 grant, and be able to support your decisions if audited, monitored, or subjected to a FOIA request.
  5. The Education Equity Fund (ESSER) is arguably the most restrictive program (limited to technology and mental health services). Accordingly, it will probably make sense to apply eligible costs there first, followed by the Governor's Emergency Education Relief Fund Grant.
  6. Since districts received less than $500 per student from the Coronavirus Relief Fund, these funds should not be subject to much audit scrutiny. Nevertheless, districts should identify and move costs associated with the safe reopening of schools or other eligible costs to this activity.
  7. Because the Education Stabilization Fund (ESSER) is so liberal in its eligibility requirements, we recommend applying general teacher salaries there to use up the funding with the fewest number of transactions possible.
  8. Contact your Rehmann advisor if you need assistance reviewing your preliminary decisions.


Michigan Department of Education, CARES Act and Coronavirus Relief Fund (CRF) Information

MI Safe Schools: Michigan’s 2020-21 Return to School Roadmap 

U.S. Department of the Treasury, CARES Act Assistance for State, Local, and Tribal Governments

U.S. Department of the Treasury Office of Inspector General, OIG-CA-20-028, Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised)

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